The Impact of the EU's Common Agricultural Policy on the Structure of Demand for Shipping Transport of Grain



The Impact of the EU's Common Agricultural Policy on the Structure of Demand for Shipping Transport of Grain

Authors

R Mirmiran, D Glen, London Metropolitan University, UK; M Nazemzadeh, University of Antwerp, NL

Description

CAP has a significant depressing effects on international grain prices and its pattern of trade, hence has consequences for the structural changes of demand for shipping transport of grain.

Abstract

Regional economic integration has become a major issue in international trade. Existing literature has failed to evaluate or quantify the implication of policy measures adopted by regional economic blocs on shipping transport services. This thesis quantifies the distorting effects of the European Union?s Agricultural Policy (CAP) on the grain trade via the impact on shipping transport.

Three different sets of econometric models were developed and estimated for each bulk carriers market sub-sector (Capesize, Panamax, Handysize), which incorporate protection subsidy component of the CAP. The results revealed that the CAP has a significant depressing effects on international grain prices and its pattern of trade, hence has consequences for the structural changes of demand for shipping transport of grain.

This work also undertakes counterfactual analysis to investigate the impact of possible liberalisation of CAP on the structure of demand for shipping transport of grain. The econometric version of the theoretical model is used to simulate a number of alternative policy scenarios in the Uruguay Round (WTO) of negotiation (EU and USA proposals). The simulation model suggests that the USA proposal will increase the North Atlantic grain trade and consequently the demand for ?Capesize? will increase. However the EU proposal would not create a significant change to the existing situation.

This original study contributes to the literature in a number of ways, In terms of economic modelling, a non-related shipping element (agricultural subsidy) is incorporated to the model as an endogenous variable. In the theoretical aspect the relationship between supply and demand in shipping market is highlighted. In econometric techniques, different methods are used for the first time to differentiate the specific nature of each sub-market in the grain trade for different bulk carrier sub-sectors. This research has highlighted the importance of non-shipping related policy measures for the grain shipping sector, especially when it is implemented by an important economic blocs.

Publisher

Association for European Transport